In Summary

On Nairobi’s Aga Khan Walk stands Uchumi Supermarkets’ 41-year-old branch, one of the first to be opened in the city. Many city residents have fond memories of this branch, when Uchumi was a retail powerhouse.

Today, while the pavement outside buzzes with activity — with the hawkers spreading their merchandise to the entrance — inside the supermarket, cashiers sit idle, staring at empty shelves.

This is the scenario in virtually all Uchumi branches, and analysts say it is all doom and gloom if the retailer does not get bailed out.

A cocktail of factors have pushed the supermarket into a financial crisis, which has seen its share price on the Nairobi Securities Exchange plunge from Ksh19.15 ($0.19) in February 2013 to as low as Ksh3.15 ($0.03) per share currently.

Dominic Ruriga, a research analyst at AIB Capital, blames bad governance for the turn of events at Uchumi.

“Poor governance gave birth to poor strategy and misrepresentation of financial statements,” he said. He added that the retailer’s expansion plan in East Africa was not well thought out.

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Amish Gupta, chief executive of AG Capital concurs, saying some of the firm’s capital is unnecessarily tied up in fixed assets.

“This firm must be privatised to allow the board to operate independently,” said Mr Gupta.

As it battles its huge debts, Uchumi has put up its land in Kasarani, Nairobi, for sale, seeking to raise $18 million.

A former director on the board, who requested anonymity, said Uchumi’s expansion was not backed by feasibility studies of the new markets. The source added that the government’s shareholding in the firm has also been an impediment, as the board does not have a free hand to chart a growth plan.

“Expansion in itself is not bad, but it must be backed by a market study to understand the new environment you are going to operate in. Uchumi’s cashflow issues going back all the way to 2004 are largely due to governance issues. I value governance more than capital injection,” the source said.